Wednesday, July 9, 2008
C.A. Allows Attachment Remedy Against Unlicensed Contractor
By KENNETH OFGANG, Staff Writer
A plaintiff may seek a prejudgment attachment against an unlicensed contractor whose alleged liability is premised on the Contractors’ State License Law, the Court of Appeal for this district ruled yesterday.
Div. Eight affirmed orders by Los Angeles Superior Court Judge Richard Neidorf, since retired, allowing Los Angeles homeowners Anita Goldstein and Eric Mizrahi to attach the assets of Barak Construction and enjoining Ami Weisz, the alleged owner of the company, from selling or encumbering his residence pending further litigation.
The plaintiffs presented evidence that Weisz told them that he and Barak, which he described as “his” company, were licensed contractors. The plaintiffs hired them to demolish and dispose of an existing garage and build a new structure on the premises at a total cost of $363,000 for labor and materials.
In fact, neither Weisz nor Barak had a contractor’s license at the time. Barak, which obtained a license three months after beginning work, received nearly the entire contract amount but allegedly abandoned the work, leading the plaintiffs to file suit in March 2005.
In a verified answer, Barak and Weisz admitted that they were unlicensed at the time work began, that Weisz was the company’s majority shareholder, and that they had received nearly $363,000 from the plaintiffs.
In response to the plaintiffs’ application for a right to attach order, however, the defendants asserted that much of the amount paid to them was for “extras” not covered by the contract, that nearly all of the work was actually done after the company obtained a license, and that there was no basis for imposing liability on Weisz personally.
Neidorf granted a right to attach order and order for issuance of a writ of attachment against Barak only, in the amount of $385,000, representing the amount of the claim plus costs and attorney fees, upon filing of a $10,000 undertaking.
On appeal, Justice Madeleine Flier concluded that all of the elements of an attachment had been established by substantial evidence—the claim was one on which a right to attach order might be issued, the plaintiffs were likely to prevail at trial, the claim was for a fixed amount, and the attachment was sought for a legitimate purpose.
She rejected the contention that the unlicensed-contractor provision of the statute, which allows recovery of all money compensation paid to the unlicensed contractor, is “punitive,” so that a claim against an unlicensed contractor would not be a claim for breach of contract and would be beyond the scope of the attachment law.
The justice reasoned that a claim under the provision “is fundamentally contractual in nature since it is based on an unlicensed contractor’s agreement with the beneficiary to provide services, and the beneficiary’s agreement to pay for same.”
In an unpublished portion of the opinion, Flier dismissed as irrelevant Barak’s claim that it had spent most of the money on materials and overhead and made very little profit on the job.
Noting that the law allows recovery of “all compensation paid to the unlicensed contractor,” the justice wrote:
“Draconian as it may seem, the Legislature has made no provision for offsets or deductions for amounts not retained or for which the unlicensed contractor has acted merely as a ‘conduit’ for payment.”
Flier noted that the California Supreme Court has on more than one occasion declared that courts may not rely on equitable considerations to reduce or reject a claim under the unlicensed-contractor provision.
The justice also rejected the contention that Barak is entitled to credit for work performed after it obtained a license. The law is clear, she said, that “the contractor must have been licensed at all times before commending any work on the project.”
The plaintiffs did not file an appellate brief. The defendants were represented by Herbert Dodell and Perry R. Fredgrant of The Dodell Law Corporation.
The case is Goldstein v. Barak Construction, B196551.
Copyright 2008, Metropolitan News Company